Raghuram Rajan vs Larry Summers

Discussion in 'Economics' started by r2d2, Aug 12, 2013.

  1. r2d2

    r2d2

    The next governor of the Reserve Bank of India
    http://en.wikipedia.org/wiki/Raghuram_Rajan

    In 2005, at a celebration honoring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom."

    Rajan argued that financial sector managers were encouraged to (take) risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks.[...] But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialize, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimized.

    The response to Rajan's paper at the time was negative. For example, former U.S. Treasury Secretary and former Harvard President <b>Lawrence Summers called the warnings “misguided” and Rajan himself a "luddite"</b>. However, following the 2008 economic crisis, Rajan's views came to be seen as prescient; by January 2009, The Wall Street Journal proclaimed that now, "few are dismissing his ideas."
     
  2. He is probably as Summers says and particularly from India I know they still don't respect the mechanism of growth created by interest and that will always hold that country back.
     
  3. brusty4

    brusty4

    So here we have an ignorant Summers. Then we have an ignorant Yellen who didn't see the risks of the crisis until it hit (Link). These are the top contenders for the Fed position?
     
  4. Raghuram Rajan is one of the best out there...
     
  5. Visaria

    Visaria